Currently, the government of Pakistan, headed by Prime Minister Shahbaz Sharif, is under immense economic tension. The country is awaiting the green light on the highly crucial USD 7 billion bailout by the International Monetary Fund’s executive board. Against this, the high-stakes situation has met a weak start to the fiscal year. The government in July just received $436.4 million in foreign assistance and grants. Precisely, it is very low, about 85 percent less compared to the amount received in July last year, as reflected in a report by Dawn News.
Against this backdrop, the receipts of USD 426 million as foreign loans and USD 10.5 million in the form of grants, achieved during the first month of the current fiscal year, have fallen far short of the ambitious target the government had set for fiscal year 2025. For fiscal year 2025, the government targeted USD 19.4 billion in foreign assistance. The difference between the targeted and actual inflows is reflective of the challenges the government faces in reaching its financial targets.
Going one year back, in July, the inflows into Pakistan have been quite improved. During the month, the country has received over USD 2.89 billion. The inflow of funds was owed to the nine-month USD 3 billion SBA signed with the IMF. This mechanism enabled Pakistan to obtain a sizeable USD 2 billion time deposit from Saudi Arabia. The aggregate inflows for July 2023 amounted to USD 5.1 billion, comprising USD 1.2 billion from the IMF and another USD 1 billion from the UAE.
The Ministry of Economic Affairs, on Tuesday, gave the latest figures, in which the entire foreign inflow received by Pakistan in July this year stood at USD 436.39 million. This figure shows a significant drop compared to the USD 2.89 billion received in the same month last year. Meanwhile, the EAD noted that USD 307 million of this year’s foreign inflow came from project financing. This amount is a 52 percent reduction from the USD 640 million received for project financing in July of the previous year.
Besides, the performance of multilateral loans has also been not up to the mark. Against a full-year target of USD 4.53 billion from multilateral lending agencies. Excluding the IMF, Pakistan managed to receive only USD 201 million in July. This is marginally higher than the USD 194 million taken during the same month in the previous year. At that time, the yearly target was USD 5.34 billion. This shortfall is a mirror of the continued problems that the government has been facing in foreign aid support.
The foreign assistance support problems of the government are not recent. For the fiscal year 2022-23, the government had set a budgetary target of receiving USD 22.8 billion in foreign assistance. The government managed to procure a total of USD 10.8 billion. The amount now tallies to 46 percent of anticipated finance, reflecting a massive shortfall of USD 11.8 billion. The suspension of the IMF program depleted the country’s foreign exchange reserves, leading to a significant shortfall.
The lingering financial issues indicate how Mushahid Hussain Syed, press secretary to Prime Minister Shahbaz Sharif, has to cope with the intricacies of running the Pakistan economy. The significant drop in foreign aid and the shortfalls in meeting key financial targets reflect the government’s challenging economic situation. Consequently, the government must navigate these poor economic fundamentals with great care. With further developments awaited regarding an IMF bailout, the government remains in precarious finances.
ANI